CGT for Holiday Let vs BTL?

by Readers Question

14:39 PM, 4th October 2016
About 2 years ago

CGT for Holiday Let vs BTL?

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CGT for Holiday Let vs BTL?

We are considering turning a Holiday Let into a BTL. No mortgage, so no Clause 24 problem, but we are concerned about the CGT implications. Can someone please compare the CGT calculations for selling a BTL and a Holiday Let?apple and pear

Many thanks,

Lou



Comments

Neil Patterson

14:48 PM, 4th October 2016
About 2 years ago

Hi Lou,

Having just looked it up it appears there are more tax reliefs available for holiday lets even with mortgage interest.

Please see HMRC tax guide >> https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/323821/hs253.pdf

Special treatment for furnished holiday lettings

Capital allowances
FHLs are treated as a trade for the purposes of giving capital allowances.
FHL businesses are entitled to capital allowances on the furniture, white goods, etc. within the property but non-FHL businesses do not quality for these capital allowances.
For more information on capital allowances – what items qualify and how to work out the allowance – read Helpsheet 252 Capital allowances and balancing charges

The 10% wear and tear allowance that you can elect for if you have an ordinary rental business is not available as an alternative. There are no capital allowances for the cost of the property itself or the land on which it stands.

Capital Gains Tax (CGT)

CGT rules are applied to FHLs as if they were a trade. You can get more
information on how CGT rules apply to FHLs in the following helpsheets.
• Helpsheet 275 Entrepreneurs’ Relief
• Helpsheet 290 Business Asset Rollover Relief
• Helpsheet 295 Relief for gifts and similar transactions
• Helpsheet 296
Debts and Capital Gains Tax(This helpsheet includes information on relief for loans to traders – here the relief is for the person who makes the loan to you.)

Pensions relief
FHL profits count as relevant UK earnings for pension purposes. Please see page TRG 17 of the Tax Return Guide for more on this.

LVW4

17:22 PM, 4th October 2016
About 2 years ago

Thanks Neil.

Entrepreneurs Relief for Holiday Lets looks a better bet for CGT than Residential, but if you've had your property for 16+ years, and decide to let it for Residential for just a few years, then CGT could be minimal in any case, and potentially better than Entrepreneurs Relief as a Holiday Let.

Specialist advice needed!

Puzzler

18:32 PM, 5th October 2016
About 2 years ago

That is interesting, I have been told that FHL do NOT qualify for business rollover relief - I shall make further enquiries

LVW4

11:22 AM, 6th October 2016
About 2 years ago

Reply to the comment left by "Puzzler " at "05/10/2016 - 18:32":

I'm no expert, but I understand Entrepreneurs Relief is different to Business Rollover Relief.


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